But its Australian arm holds out against any payments.

Volkswagen agrees to landmark US compensation deal

Volkswagen's US arm has agreed to pay $20 billion in fines, buybacks and compensation to customers and regulators following the "dieselgate" emissions scandal.

But the brand's local distributor remains resolute in refusing to offer cash to Australian customers, saying the US is a special case because of its stricter emissions requirements.

Volkswagen made headlines around the world last year when it admitted to engineering emissions defeat devices that allowed popular turbo diesel models to pass laboratory tests before exceeding pollution limits in the real world.

Volkswagen agreed on Tuesday to give owners of about 475,000 2.0-litre turbo diesel models a one-off payment of $US5100 ($6885) in addition to a commitment to buy back cars for pre-scandal values.

Volkswagen has agreed to pay $20billion in fines and compensation in the US following its diesel emission scandal Photo: Supplied

Customers who already sold cars following the issue will share payments with new owners, and special arrangements are in place for people with a current lease.

The manufacturer has also committed to fixing 2.0-litre cars affected by the issue, though the remedy may not be in place for quite some time.

Owners of larger 3.0-litre turbo diesel V6 models such as the Volkswagen Touareg and Audi Q7 will not receive cash or buy back offers under the deal.

Volkswagen has also committed to paying $US4.7 billion ($6.345b) toward emerging green transport programs in the US, as well as shelling out $US600million ($810m) to 44 states.

Volkswagen Australia issued a statement saying it would take a different course.

The manufacturer's local managing director, Michael Bartsch, says "Volkswagen believes that the best outcome for its customers is the technical solution. This will update the software in vehicles which are the subject of the class action at no charge to customers."

"When these are approved, the owners will be immediately advised to make an appointment with their dealer for the free software upgrade (and a free hardware update for some vehicles)," he says.

While Volkswagen Australia has not volunteered to compensate customers, current class action lawsuits underway in the Federal Court of Australia could force the brand to pay up, or prompt it to reach an out-of-court settlement with lawyers representing disgruntled owners.

"There is no compensation for European customers," Bartsch added.

"The relevant facts and complex legal issues that have played a role in coming to these agreements in the United States are materially different from those in Europe and Australia.

"Volkswagen is committed to resolving the diesel matter for all affected customers around the world quickly and efficiently. We recognise the need to regain their trust and we are doing everything possible to achieve this."

But Bartsch says important differences between US and European - and by extension, Australian - emissions regulations have largely gone unnoticed.

The main issue surrounding VW's US problems centres on that country's strict limits on nitrogen oxides, which allow cars such as the Volkswagen Golf to emit no more than 0.05 grams per kilometre of NOx.

Australian regulators do not require full compliance with Euro6 regulations until July 2018.

"It is regrettable that interested parties ignore the polar differences between emission regulations in the United States and Australia. This only adds to public confusion," Bartsch said.

"Regulations governing nitrogen oxide (NOx) emissions limits for vehicles in the United States are much stricter than those in other parts of the world and the engine variants also differ significantly. European and Australian standards focus on lowering environmentally harmful carbon monoxide emissions and fuel consumption.